As summer arrives, the rally in Hong Kong-listed biotech stocks is still going strong.
In the first half of the year, companies like Harbour BioMed (HBM), Jacobio Pharmaceuticals, and 3SBio saw their share prices more than triple, with several others at least doubling. A new wave of IPOs is cresting in the Hong Kong market: major players including Hengrui Pharmaceuticals and Duality Biotherapeutics have gone public, while more than 30 other healthcare firms have filed to list. Nearly two-thirds of them focus on novel drug development.
The resurgence in Hong Kong’s biotech sector has been catalyzed by a spate of large business development (BD) licensing deals. But the underlying driver is capital. Specifically, a return of foreign investment and an influx of southbound funds from mainland China, creating liquidity that allows fundamental value to be priced in.
In the first half of 2025 alone, Chinese pharmaceutical companies executed more than 70 outbound BD deals. Upfront payments totaled USD 3.3 billion, with cumulative deal value reaching USD 48 billion. BD deals have become a kind of nuclear option for biotech stock valuation management, with virtually every company that closes a deal seeing its stock price rise. Some companies now even tease deals in advance, leveraging investor interest to drive up share prices.
At the individual stock level, there’s often a blur of hard-to-verify noise. But overall optimism in the Chinese biotech sector has made Hong Kong-listed biotech exchange-traded funds (ETFs) a preferred vehicle for many investors. Multiple ETFs now market themselves with slogans like pure-play biotech exposure and high cumulative returns, drawing global capital into the space.
Brokerages and consulting firms have also jumped in. After 3SBio and Pfizer inked a BD deal that included an unprecedented USD 1.25 billion upfront payment, Citigroup published an analysis in June evaluating Chinese pharma stocks by dividing BD deal value by market cap. The resulting metric, it argued, reflects how much of a company’s BD potential is already priced in, highlighting Abbisko, Henlius, Biotheus, and Junshi Biosciences (also known as TopAlliance) as undervalued relative to recent deals.
So, what’s the outlook for biotech firms in Hong Kong? Can the valuation boom driven by BD deals continue? How should investors evaluate the relationship between BD activity and market capitalization? Four healthcare-focused investors and operators were invited to share their views with 36Kr. The consensus? There is no full consensus.
The consensus
There is broad agreement that Chinese biotech assets and clinical data have gained broad recognition from multinational pharmaceutical companies. These companies are no longer opportunistically picking up bargains. Instead, they have integrated Chinese assets into their global R&D pipelines and are conducting strategic comparisons before making selections.
36Kr found that three of four interviewees believe the BD environment will remain robust over the next year. The hottest areas are expected to continue to be oncology, autoimmune diseases (such as atopic dermatitis and lupus), and metabolic disorders (such as obesity and nonalcoholic fatty liver disease).
However, Bao Jun, chief business officer of Biotheus, expects a cooling-off period. He believes the recent BD boom was driven by a one-time release of data accumulated over the past decade by Chinese biotech firms. Now that mature pipelines in oncology and autoimmune disease have largely been picked over, the next wave may lie in underexplored areas like central nervous system (CNS) disorders.
Assessing deal value
All respondents agreed that BD deal value should be anchored in upfront and near-term milestone payments. Royalty streams or long-term profit sharing are too uncertain to serve as a reliable benchmark. But even deal structures can hint at value alignment: how both sides price an asset tells you something about expectations.
Chinese BD pricing is increasingly converging with that of trends in the US. As a rule of thumb, Phase 1 assets typically command USD 10–30 million upfront, while Phase 2 and Phase 3 figures straddle USD 50–100 million and USD 100 million or more, respectively.
If an upfront payment exceeds USD 100 million, it likely signals competitive bidding among buyers.
Regarding the future performance of Hong Kong-listed biotech stocks, Ding Yameng, founding managing partner and COO of Haoyue Capital, believes that the market is shifting from a manufacturing-based valuation system to one centered on innovation assets. With multiple catalysts including pipeline maturity, BD monetization, and capital inflows, he foresees continued upside potential.
Wang Xun, chief investment officer at Huagai Capital, believes the market has recovered about 40% of its peak from 2021, and estimates there may be another 20% of room for cyclical rebound.
A biopharma investor who spoke on the condition of anonymity added that even if a few pipelines are returned by buyers, it does not indicate systemic risk. As long as there are no major compliance violations such as clinical data fraud, China’s reputation for exporting novel drugs should remain intact. If this rally isn’t overextended, the market is likely to trend upward through volatility.
The BD cycle is likely to slow down
Bao Jun (Biotheus): The 2025 Hong Kong biotech rally has been driven in large part by BD activity. Another key reason is the relatively weak performance of US biotech stocks, which has pushed some capital toward Asia. At this point, the Hong Kong market places a lot of emphasis on a biotech firm’s BD capabilities. It’s practically an unspoken requirement for IPOs. Rumor has it that without a solid BD track record, it’s now quite difficult for a novel drug company to go public in Hong Kong.
In the past, commercialization was largely considered the gold standard for value realization. There were questions about whether a company that sold off its pipeline would have enough left to support a listing. But the IPO of Duality Biotherapeutics helped resolve this doubt. Despite having no approved products, they had already signed several major BD deals worth over USD 5 billion in potential value. Since listing in April 2025, their market cap has surpassed HKD 25 billion (USD 3.2 billion).
Today, investors see BD licensing as a validation of a company’s R&D and business development capabilities. If a company can sign one deal, it’s assumed they can continue to do so, making them an attractive investment.
This shift reflects the growing maturity of the BD market in China.
In 2023, the hot topic was antibody-drug conjugates (ADCs), but now there’s greater diversity spanning bispecific antibodies, autoimmune drugs, and metabolic treatments, among others. Market sizes are expanding too. Clinical data from China is gaining credibility internationally. The buyer base is broadening to include not just multinationals, but also smaller companies and investment funds.
Companies are also watching each other and learning fast. Once multinational firms begin doing deals, others—perhaps slower to act—may take notice and begin to evaluate their internal processes. They are now giving more serious consideration to assets sourced from China.
As asset quality improves and buyer interest grows, pricing is trending toward parity with the US. If a buyer deliberately lowballs, they won’t win the deal.
From a BD execution perspective, I pay close attention to who the buyer is. If it’s a multinational pharmaceutical company, that signals they’ve conducted deep due diligence and see real strategic value. Even if it’s a NewCo backed by a fund, those investors don’t deploy capital lightly. And NewCo entities, being single-asset companies, are highly motivated to ensure development success.
Two or three years ago, people often claimed that China’s innovation was being sold cheap. I think that was mostly projection. In deals with multinational companies, the prices are generally fair.
Asset valuation is a rational process. The methodologies are well-established. Most use net present value (NPV) models. Where buyers and sellers might diverge is in assumptions, such as the market share a drug might eventually achieve. That’s where milestone payments come in, to bridge those expectations over time.
As for pricing, Phase 1 products usually fetch USD 10–30 million in upfronts, while Phase 2 products go for around USD 50–100 million. As for Phase 3, it’s roughly USD 100 million. If the upfront is over USD 100 million, it probably means multiple buyers were competing. That’s the only way to push the price that high.
That said, blockbuster deals like the 3SBio-Pfizer partnership (USD 1.25 billion upfront, USD 6.08 billion total) are still outliers. The bispecific antibody space is hot right now mainly because of Akeso’s AK112, which beat Keytruda in a monotherapy head-to-head Phase 3 trial.
That’s difficult to replicate. For example, if BeOne Medicines (formerly BeiGene) fully licensed out its head-to-head BTK (Bruton’s tyrosine kinase) program, it could command huge value too. But do we expect every BD deal to be preceded by head-to-head Phase 3 trials? That’s unrealistic.
So, we shouldn’t expect prices to keep climbing. The norm for Phase 2 assets is still USD 50–100 million upfront.
And the BD market as a whole will likely slow down. The recent surge was powered by a backlog of clinical data built up over the past decade. Now, the most attractive oncology and immunology assets have largely been picked over. For companies that lost out on earlier bidding wars, they may now pause to reassess what’s still available.
I personally think there may be one or two more deals in the PD-1 and VEGF space. But new opportunities are more likely to emerge in previously overlooked areas like CNS diseases.
That said, variables remain. More overseas funds could come to China looking for early-stage assets. Compared with multinational pharma, funds are more open to earlier bets or direct equity investments, which could fuel more BD activity. Another strategy we’re seeing is to bring US-originated assets into China for development, leveraging lower costs and higher efficiency.
More upside remains as recovery remains underway
Wang Xun (Huagai Capital): Duality Biotherapeutics raised close to HKD 20 billion (USD 2.6 billion) in its April IPO, exceeding our expectations. If this had happened last year or two years ago, there’s no way the offering could have been priced that high.
Then in May came the deal between 3SBio and Pfizer: a USD 1.25 billion upfront payment, which surprised the entire market and set a new record for Chinese biotech BD deals. In 2023, Pfizer had just spent USD 43 billion acquiring ADC heavyweight Seagen. We thought it’d take a breather. But clearly, Pfizer was ready to move again.
Over the past five years, the growth in outbound BD from Chinese drugmakers has been linear and steady. This is the result of long-term industry accumulation. Chinese companies are now developing best-in-class assets that multinationals are willing to pay for. Each global pharmaceutical company has its own focus: Pfizer emphasizes oncology, Sanofi leans into immunology, AstraZeneca favors oncology and respiratory, and Novartis focuses on cardiovascular disease. But oncology remains the foundational category, with immunology and metabolic disease emerging as priority areas.
Seven or eight years ago, multinational firms rarely found Chinese assets attractive. Many didn’t even have local search and evaluation teams. When I worked in corporate BD, our team focused on M&A, license-outs, asset divestitures. Large-scale transactions, essentially. Early-stage scouting was not part of the China strategy.
That changed in the last three to five years. Multinational reps began hiring people with strong scientific and R&D backgrounds into their China BD teams, specifically to identify early-stage projects. Companies like AbbVie are actively expanding their BD teams to scout for new pipelines. In addition to local engagement, Chinese biotech founders are pitching more frequently at international conferences, accelerating outbound BD discussions.
With the US dollar weakening and capital flows becoming more favorable, I believe BD momentum will continue into the second half of the year. Oncology, immunology, and metabolic disorders are likely to yield more big-ticket deals.
At its core, BD is about negotiation. The components (upfront payments, milestones, royalties) often shift in balance depending on the parties’ priorities. Some companies prefer to secure more cash upfront, while others are more optimistic about downstream royalties or milestone payments. Because of that, BD deal value doesn’t always align neatly with a company’s market cap or valuation. That said, landing a BD deal, especially with a top 20 multinational firm, is a very positive signal.
When evaluating pipelines, most people in the industry still use NPV models. These factor in market launch timelines, peak sales, cost structure, and discount rates to estimate how much value should be allocated between buyer and seller. Of course, the further out the forecast, the higher the uncertainty. If an asset is already in Phase 3, the royalty rate might exceed 10%. In Phase 1 or 2, it may be in the low single digits, say 3–5%. But none of that is set in stone.
Today, my primary focus is on the upfront and near-term milestone payments. Anything beyond that is too uncertain to matter much, no matter how large the total package may look on paper.
Looking ahead, I don’t expect the Hong Kong biotech market to perform poorly. Investors are actively seeking new opportunities, and the market has recovered about 40% of its peak from the 2021 bubble. There may be another 20% of room for cyclical rebound.
Many companies have recently filed for IPOs in Hong Kong. Founders are eager to accelerate their timelines to capture this window of opportunity. But ultimately, only a few have what it takes to succeed. Regulators are also managing the pace to avoid a flood of listings all at once. We have portfolio companies that have just received approvals.
Specifically, I pay more attention to companies that are included in the Stock Connect program. Larger companies offer more stability and lower risk. Smaller-cap firms are too volatile, making it difficult to evaluate them confidently.
Shift in valuation methodology
Ding Yameng (Haoyue Capital): By the end of 2024, I was already paying attention to signs of a rebound in Hong Kong’s biotech market. The ignition point came when Akeso’s AK112 beat Keytruda in a monotherapy head-to-head Phase 3 trial. That clinical milestone sparked a global rush into bispecific oncology drugs and directly fueled follow-on BD deals for Biotheus, 3SBio, and others in the same space.
From the final quarter of 2024 to the first quarter this year, 18 Hong Kong-listed drugmakers signed 24 BD deals, representing a doubling of activity. Six deals included upfront payments exceeding USD 500 million. In contrast, only three such deals were recorded in the previous three years combined.
There has been a noticeable shift in mindset among biotech founders. After the hard lessons of the past two years, they have become more pragmatic and proactive. Previously, many founders waited for BD opportunities to come knocking. Their main focus was on fundraising and operations. But this year, many are actively pursuing BD opportunities, because missing one could mean handing the deal to a competitor.
What impressed me most this year was seeing preclinical or IND (investigational new drug) pipelines secure massive upfront and milestone payments. This indicates that buyers are willing to bet heavily on best-in-class potential. Take the 3SBio-Pfizer deal, for example: a USD 1.25 billion upfront for a bispecific oncology drug.
In the past, multinational firms were more inclined to pursue co-development or mutual licensing, not huge one-time cash payments. Two or three years ago, they were often driven by opportunism, entering the Chinese market for cost and efficiency reasons. But in 2025, we’re seeing more strategic thinking. Chinese assets are being evaluated as part of global target landscape reviews. The frameworks for pricing and deal structure have evolved. Buyers are now weighing not just clinical data, but also target validation, mechanism of action, and indication strategy.
That means Chinese companies need to go beyond clinical results and start thinking in terms of a global strategy: how to differentiate the drug, how to span multiple indications, how to align regulatory plans. That’s what gets the attention of global BD teams.
In terms of deal structures, most early-stage programs are still signed as option-based licenses with low upfronts, future buy-in rights, and cost-sharing arrangements to mitigate risk. Merck’s March deal with Hengrui Pharmaceuticals for the cardiovascular drug HRS-5346 used exactly this model: sharing both risk and reward.
Everyone can feel the temperature rising, that Hong Kong’s IPO market is back. In the first half of 2025, biotech fundraising volume rose more than sevenfold year-on-year. Hengrui’s H-share offering alone raised HKD 13.1 billion (USD 1.7 billion), setting a new record. IPO subscriptions are hot too, with some deals oversubscribed hundreds of times.
For pre-IPO companies and investors alike, Hong Kong is now seen as a launchpad for global expansion. The recent relaunch of the STAR Market’s fifth listing path is also a positive development, but its positioning makes it better suited for early-stage science plays. Hong Kong, by contrast, is for growth-stage companies aiming to go global.
Naturally, we hope this rally lasts. Whether it does will depend on factors like continued outbound BD activity and whether the US Federal Reserve cuts rates later this year. But I expect outbound BD to remain active in the second half of 2025. In major indications like immunology, oncology, and metabolic disease, and on technology platforms like bispecific and multispecific antibodies and ADCs, we’ll likely see more major deals.
I do believe traction for biotech will keep building in Hong Kong. The logic from overseas investors is clear: this is a space that combines certainty, growth, and uniqueness. The data backs this up. In 2024 alone, foreign investors bought RMB 89 billion (USD 12.5 billion) worth of Hong Kong biotech stocks via the Stock Connect program. Among constituents of the Hang Seng Biotech Index, 85% have proprietary pipelines, and foreign ownership has climbed to 42% over the past year. There’s a growing belief that the Hong Kong market is transitioning from valuing manufacturing assets to valuing innovation assets, and I completely agree.
Future catalysts for continued growth include: pipeline maturity, later-stage product development, monetization through BD or NewCo spinouts, and inflows of capital from both mainland China and overseas.
A single deal can cover every investor’s cost basis
Anon: In early 2024, almost no one in the primary market was looking at novel drugs. But that has changed. More people have come back in the first half of the year. Even with uncertainties around A-share IPOs, we now have two solid exit paths: outbound BD and Hong Kong listings. With exit channels clarified, investor confidence is returning.
After several quiet years, the Hong Kong biotech sector finally stirred. Until Q3 2024, many companies and investors still viewed listings in Hong Kong as neither here nor there. Valuations were low, liquidity poor. But in the first half of 2025, optimism revived.
I think this rally is fundamentally driven by capital. Valuations don’t move without liquidity. BD deals, especially those valued highly, serve as powerful catalysts. But when media reports cite a USD 10 billion package, investors should dig into the structure: how much is upfront, how much is in near-term milestones. The rest is often too speculative to matter.
A decade ago, most Chinese drugmakers were importing pipelines or engaging in fast-follower strategies. But during the pandemic, huge inflows of capital allowed biotech players to pursue true innovation. Now, many early-stage programs are global firsts, even at the basic research level.
Multinational companies have also moved upstream. We’ve seen early interest in Phase 1 or 2 pipelines from small RNA and immunology-focused startups in our portfolio. BD is now a viable exit path even at an early stage. And for investors, one successful BD deal can fully recoup their capital outlay.
Reputation in the private market matters too. Companies like MediLink Therapeutics and Elpiscience, with proven BD track records or strong institutional backing, tend to attract more interest during their IPOs.
Outbound BD will only get stronger. Global pharma still needs high-quality assets, and the quality of Chinese pipelines continues to improve. That’s thanks to cost-efficient clinical resources and a fully built-out supply chain.
Even if a few drug programs get returned by buyers, it won’t create systemic risk. As long as there’s no fraud or data falsification, China’s reputation for innovation abroad will remain intact. The biggest uncertainty could be geopolitical, say, if the US imposes new sanctions on Chinese drugmakers.
In terms of indication areas, oncology, immunology, and metabolic disease remain the big three. In the metabolic space, I think small nucleic acid platforms will shine. T-cell engagers (TCEs) may be past their peak, but antibody engineering platforms such as customized formats and ADCs are still a core strength for Chinese researchers. I expect more deals to emerge from those areas.
The commercial fundamentals for Hong Kong-listed biotech companies are also improving. I remember in 2023 and early 2024, when the capital winter was in full swing, many institutions were tracking how long these firms could survive on their cash reserves. That kind of analysis has disappeared lately. Leading firms are raising more capital through follow-ons, getting drugs approved, and commercializing their products. Losses are narrowing. Confidence is returning.
Of course, stock prices are still affected by all sorts of noise, including rumors of upcoming BD deals. But as long as the rally doesn’t get overhyped and leave investors stranded at the top, I think the Hong Kong biotech market will likely rise steadily, with some bumps along the way.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Hai Ruojing and Hu Xiangyun for 36Kr.